Are you someone who religiously pays your mortgage to get out of home loan debt? But is it the smartest thing to do? Have you ever considered buying an investment property to get out of debt? You might think, ‘Oh great, get into more debt to get out of debt?’ Yes, because even if you get into more debt, later it will provide leverage for you to get out of your debts earlier with a surplus.
Considering buying an investment property but don’t have enough money for a deposit? Well, if you are constantly paying your mortgage, you might be sitting on a gold mine. If you have the serviceability, you can use the equity from your current home to pay a deposit on an investment property. Just make sure to ask your mortgage broker to create two separate loans, so you can save tax on the interest you pay on the second loan. Also, make sure not to use that loan money for other personal uses like buying a car. If you do, it will contaminate the loan and your tax savings will be lost. Also, make sure the home loans and the investment loan are separate from each other to avoid cross-collateralization. Talk to a mortgage broker and an accountant about your options.”
How to calculate the usable equity that you can use as a deposit for an investment property.
| Current appraised value of your home | $750,000 |
| Possibility to borrow up to 80% of the value | $600,000 = ($750,000 x 80%) |
| Remaining mortgage of the home | $350,000 |
| Useable equity to for a deposit | $250,000 = ($600,000 – $350,000) |
Wow, $250,000? See, you are sitting on a gold mine. In some states, you only need about a $100,000 deposit to buy a decent investment property. You can also utilize lenders mortgage insurance if you are short of the 20% deposit. Talk to your mortgage broker and accountant about your options and how you can benefit from owning an investment property. Good luck digging into your gold mine. This article provides general information only to raise awareness of the possibilities. Please seek financial advice from a professional, as tapping into equity without knowledge could alter the outcomes.”
